European model of employment and industrial relations

The European model of employment and industrial relations includes a range of issues, both at national and supranational levels, which to different degrees are of central importance to the 27 Member States of the European Union (EU) and of immediate concern to the acceding countries. Although different traditions continue to prevail as a result of Member States’ varying historical trajectories, similar employment structures and advances in European legislation have paved the way for a common industrial relations context. In recent years, some commentators even speak of the ‘Europeanisation of industrial relations’.

The EU’s economic and political stature makes its employment and industrial relations model the subject of considerable attention elsewhere. In its attempt to highlight the defining features of the European social model, the European Commission often contrasts employment and industrial relations practices existing in Europe with those present in the USA. It is not suggested that the European social model can or should be exported, but rather that certain features may provide a basis for reflection, if not emulation in other parts of the world. A number of features lend themselves to highlighting what is unique about the European social model. Three characteristics in particular are noteworthy:

Collective representation

A key facet of the European social model concerns the organisational context of worker and employer relations. At EU and national level, these actors interact in a variety of ways and at different levels. The collective organisation of the social partners has given rise to what is widely referred to as the ‘social partnership’ model. The density and membership levels of trade union and employer organisations in the EU are an indicator of the important role these organisations play in the regulation of employment.

Trade unions

According to the Eurofound report, Industrial relations developments in Europe 2009, the declining trends in trade union density continued over the past years. Density is defined as the ratio of trade union membership compared with the eligible workforce.

Carley (2009) identifies that trade union density in the EU is around 39%, or 35% when weighted for the size of the national workforce. A clear divide emerges between the EU15 and Norway, where trade union density is at 49% (about 36% weighted), and the 12 new Member States, where the density rate is lower (27%, or 23% weighted). These figures already indicate a low influence of trade union organisations across Europe, but the trends are of even more concern. Between 2003 and 2008, the majority of trade unions in the EU Member States report decreasing membership and density trends. The decline among the Member States is widespread, with the largest decrease being found in Slovakia and Sweden, where density fell by more than 10 percentage points; on the other hand, in Portugal, Romania, Spain and the UK, the decline was more modest, amounting to less than one percentage point. Belgium is almost the only country showing positive trends in both dimensions. Trade union density fell over the period even when membership was rising – this was the case in Cyprus, Finland, Ireland, Italy, Norway, Portugal, Romania, Slovenia and the UK. One reason for this situation could be that, despite their capacity to increase their membership, trade unions are not organising areas of economic activity in which employment has recently been created.

Trade union membership and density, although fundamental, constitute only part of the picture and, from the institutional point of view, arguably the less important part. The trade union membership figures have to be translated into institutional or organisational forms – trade unions – and the importance of these organisational forms depends on their regulatory functions. These, in turn, depend on their relations with employers, their organisations and the state – and the outcomes of these relationships in terms of regulatory instruments, such as collective agreements and government legislation.

In terms of organisational structures, two patterns prevail. At one extreme, trade unionism is marked by centralisation: the existence of a few trade unions that are organised along industry sectors, as is the case in Austria and Germany. In contrast, the situation of trade unionism in Ireland and the UK, which is very similar to that in the USA, traditionally involved centralisation but reveals today a pattern characterised by multiple trade unions which fiercely compete for members and have no clearly defined industry boundaries. It should not be overlooked, however, that the wave of mergers over the past few years is responsible for the reduction in the number of trade unions in the UK.

The diverse picture which emerges when looking at national practices is in contrast to the situation at European level. At EU level, centralisation and sectoral organisation are very strong: the European Trade Union Confederation (ETUC) and the growing number of European industry federations provide members with a clear organisational profile.

Employer organisations

Another distinguishing factor of the European social model concerns the grouping of employers in a collective body which either negotiates with trade unions or lobbies government on their behalf. The former is characteristic of the situation in the UK, while the latter is to be found in Germany and other countries where industry-level collective bargaining prevails.

Although at national level employer organisations have a strong presence in the various sectors of the economy in the form of sectoral employer federations, at European level they are highly centralised. The European employer organisations – including BusinessEurope (formerly UNICE), UEAPME and CEEP– engage in social dialogue and negotiations with ETUC. The second dimension, employers’ sectoral organisation (in contrast to trade union industry federations) was for a long time underdeveloped. However, the European Commission attempted to address this issue in December 1998 by passing a decision leading to the creation of sectoral social dialogue committees. In 2011, there were 40 such committees. To date, Eurofound is aware of more than 500 commitments of different types and scale made by such sectoral social dialogue committees, seven of which are binding agreements.

Collective bargaining

Although a variety of ways exist in which trade unions and employers can interact, the most usual is collective bargaining at sectoral level. Collective bargaining is the process by which worker and employer organisations negotiate over the central issues of pay, working time and other elements of the terms and conditions of employment under which work is to be performed. Even though such formal bargaining has not yet emerged at EU level, EU-level coordination of collective bargaining in the Member States can be observed. National trade unions and European industry federations, such as the European Metalworkers Federation, have developed what has become known as ‘virtual’ or ‘arms-length bargaining’. This involves national actors’ awareness of cross-national developments as well as agreeing to comply with minimum standards: for example, that all pay agreements exceed inflation.

In the former EU15 Member States, collective bargaining is the most important process of regulating working life. On the key issue of pay determination, the dominant level of bargaining is at the intersectoral level in three countries (Belgium, Finland and Ireland) and at the sectoral level in eight others (Austria, Germany, Greece, Italy, the Netherlands, Portugal, Spain and Sweden). In 2008, a process started in Finland to decentralise collective bargaining to the sectoral level. A high degree of collective bargaining centralisation is most dominant in the majority of Member States. This contrasts with the situation in the USA, as well as Japan and countries like France and the UK, where individual company-level negotiations are the norm.

A powerful indicator of the role of collective bargaining is its coverage, measured by the proportion of workers whose pay is determined by collective agreements. Collective bargaining coverage often outweighs trade union density levels, as is the case in France. Centralisation of collective bargaining as well as intersectoral and sectoral bargaining mean that collective agreements will cover all employers in the country or the sector, even where workers are not members of trade unions. Coverage ranges from 98%–99% in Austria, 95% in Belgium, 83% in Denmark, 32% in Hungary, 65% in Germany, to 33.5% in the UK and only 17% in Lithuania. Thus, one of the features of the European social model is its high collective bargaining coverage, ranked top in the world with regard to this indicator.

Although collective bargaining appears to be stable on the whole in Europe, this central form of employment regulation is constantly evolving. In recent years, the decentralisation of collective bargaining has increased in importance, with company and plant-level negotiations complementing agreements signed at sectoral level. In some Member States, such as Austria and Germany, this has involved social partners agreeing to delegate the right to negotiate on certain issues to company-level representatives. This is commonly referred to as either ‘organised decentralisation’ or ‘re-regulation’. Such a development has not only the effect of redefining relations between employers and trade unions but also between plant-level actors such as works councils and trade unions.

Employee participation

Macro-level consultation and dialogue influence major issues of social and economic policy in many Member States, while collective bargaining determines pay, and other terms and conditions of employment. Nonetheless, the day-to-day working life of most people in the office, shop or factory is subject to a myriad of decisions concerning, for example, working practices (performance), conduct at work (disciplinary matters), and health and safety. Rather than these decisions being taken unilaterally by management, a mandatory system of worker participation has developed in the EU Member States. In fact, a general decentralisation of employee relations has led to an increase in the importance of employee participation.

According to the European Commission, such workplace representation is a ‘distinct feature’ of the industrial relations systems within the EU. Workers are involved in these decisions through representative structures of ‘works councils’, ‘enterprise committees’, trade union bodies and similar bodies. This involvement can entail either hard co-determination or soft information and consultation rights. The EU has now taken a decisive step towards ensuring that employee representation is a key part of the European social model by adopting Council Directive 2002/14 establishing a general framework for improving information and consultation of workers. The objective was ‘to make the essential changes to the existing legal framework [...] appropriate for the new European context’. This represents an attempt to bring industrial relations systems in countries such as Ireland, the UK and the new Member States in line with most of the old EU Member States.

The process of economic integration also encouraged the Commission to raise national participation rights to a supranational level, by passing the European Works Council (EWC) Directive in 1994 (recast in 2008). The EWC Directive states that employees working in enterprises with at least 1,000 workers and a minimum of 150 workers in two countries within the European Economic Area (EEA) have the right to set up an EWC. While they offer employees mere information and consultation rights, the current 988 EWCs in existence represent around 15 million employees and have become a unique and important institution that compliments national industrial relations systems.

EU as employment and industrial relations regulator

For almost three decades now, EU employment and industrial relations have slowly and incrementally developed within the institutional framework of European integration. In the early years of the European Economic Community (EEC), the initiatives of the Community’s institutions in the field of employment and industrial relations were relatively limited and focused on securing the objective of a common labour market. This was due to the fact that the founding Treaties (ECSC, EEC and Euratom) aimed first and foremost at economic integration, i.e. the creation of a common market first, with social questions second. Today, the breadth of European social policy has produced a close interweaving of European and national legislation in the area of employment.

European social dialogue

Although the 1970s witnessed various moves to improve the social profile of the then European Community, the real breakthrough came in the mid-1980s with the emergence of European social dialogue. This the result of the historic ‘Val Duchesse’ initiative promoted by Jacques Delors, the incoming President of the Commission in January 1985. Delors invited the chairpersons and general secretaries of all the national organisations affiliated to the EU-level employer and worker organisations – UNICE (now BusinessEurope), CEEP and ETUC – to a meeting held in the castle of Val Duchesse outside Brussels. Since this significant event, European social dialogue has largely contributed to a broadening and deepening of the ‘European social model’. Today, since the passing of the Treaty of Maastricht on 1 November 1993, EU-level social partners have become ‘co-legislators’ in the formulation of EU social policy.

According to Article 154 TFEU, the Commission, before submitting proposals in the social policy field, has to consult management and labour on the possible direction of the Community action. If, after such consultation, the Commission considers Community action advisable, it is obliged to consult management and labour on the content of the envisaged proposal. In the course of the consultation, the social partners also address the question posed by Article 154(4) TFEU – whether they wish to initiate the process provided for in Article 155 TFEU: bipartite social dialogue, which may lead to contractual relations, including agreements. These European framework agreements shall then be implemented in two possible ways: either on request by the European social partners by a Council decision (i.e. in practice by a directive) or ‘in accordance with the procedures and practices specific to management and labour and the Member States’. Recently, a number of framework agreements have been signed on telework (2002), stress at work (2004), harassment and violence at work (2006) and inclusive labour markets (2010).

EU Charter of Fundamental Rights

A more recent development designed to further raise the regulatory profile of the EU involves the Charter of Fundamental Rights of the European Union. On 12 December 2007, the President of the European Parliament, Hans-Gert Pöttering, the President of the European Commission, José Manuel Barroso, and Portuguese President and the then acting President of the EU, José Socrates, signed the Charter of Fundamental Rights in advance of the signing of the Treaty of Lisbon by the heads of state in the same month. Due to the fact that the EU Reform Treaty made reference to the Charter, fundamental rights were to become legally binding with the ratification of the Lisbon Treaty.

The EU Charter of Fundamental Rights has important implications for the European social model in general and for the concept of EU citizenship, particularly in the spheres of employment and industrial relations. The EU model of employment and industrial relations requires legitimate institutional governance structures and the EU Charter can play a major role in this regard. The Charter’s fundamental rights ascribe legitimacy to collective bargaining and collective action, and information and consultation on a wide range of issues at company level. Affirming rights to engage in work, vocational training, equal opportunities, and other social and labour standards provides support for the distinctive EU model of individual employment relationships.

With the entry into force of the Treaty of Lisbon on 1 December 2009 the EU Charter of Fundamental Rights became integral part of EU law (Article 6(1) TEU).

Conclusion

Although the importance of EU employment legislation has increased in recent years, its advance has been designed to complement rather than replace national practices. The emphasis placed on subsidiarity, as well as on the principle of the open method of coordination (OMC), testify to this fact. There exists an inter-play between supranational and national employment levels, where above all considerable thought is paid towards respecting the latter. This is quite obviously the case regarding the European Works Councils (EWC) Directive, where national representative practices are taken into account.